Talisman Underscores Global 3Q Operations

Talisman has provided an update for its global and ongoing operations in the third quarter of 2008.

North America

Production from continuing operations was up 6% from the same period in 2007 and relatively unchanged from the previous quarter, primarily due to development success in Monkman and Bigstone/Wild River. Talisman's Midstream Operations transported and processed 639 mmcf/d in the quarter, 3% above the third quarter of 2007.

On July 11, Talisman completed the sale of Leases 6, 10 and 50 in the Athabasca oil sands region.

Capital spending to the end of September was $1.6 billion. Unconventional capital spending was $1.1 billion, including accelerated drilling and land acquisitions in the Montney Shale, Greater Hinton, Bakken Expansion and Pennsylvania Marcellus plays.


The Company continues to add land and increase drilling in its unconventional natural gas areas. The Company has completed approximately 114 gross unconventional wells year-to-date (69 net) in its new unconventional play areas. The Company has also drilled 96 gross (60 net) unconventional wells in heritage areas such as Bigstone/Wild River. Production in Bigstone/Wild River averaged 158 mmcf/d during the quarter, an increase of 13% over the same period in 2007.


The unconventional Montney play is becoming a core area for Talisman in BC and Alberta. The Company has built a substantial land position, is making significant progress on its pilot programs and preparing to move more areas into the development phase.

Current production from Talisman's Montney Core area in Alberta is 31 mmcfe/d (net sales, 19% liquids). Talisman has drilled 29 gross wells (21.4 net) year-to-date with plans to drill 54 gross wells (40.6 net) in 2008. There are currently seven operated rigs drilling and five are drilling from pads.

Of the 16 gross (14.2 net) pilot wells planned for 2008, 13 gross pilot wells have been drilled and four have been completed. Production results are encouraging with initial production rates ranging from 1.6 mmcf/d to 3.6 mmcf/d.

Several Montney shale play areas will likely be ready to proceed to development in 2009. Two rigs are currently drilling pilots in the play and this is expected to grow to six rigs by January, with potential to add over six additional rigs by mid-2009.

Talisman has built one of the largest landholdings in the Groundbirch area. The Company currently holds interests in over 65 net sections, having acquired approximately 32 sections (100%) at land sales this year. Each section has the potential for up to eight development wells per prospective Montney zone. Piloting will confirm the number of zones.


The Company is shifting its focus towards Pennsylvania from New York State where our five well pilot drilling program has been deferred, pending environmental and regulatory reviews by the State.

The Company was successful in acquiring 14.6 net sections of state-controlled land in Pennsylvania, bringing our total acreage to 186.8 net sections. Pilot drilling is ongoing with one operated rig drilling. One vertical well and one horizontal well have been drilled with another horizontal well currently drilling in an area where the Company owns 30 net sections prospective for development. Talisman's first operated horizontal well will be completed in early November.


Talisman recently announced a successful well test from the Utica shale with its re-entry of a vertical Gentilly well with a test rate of 800 mcf/d from one zone. The Lorraine shale is also being tested in this well. Frac design parameters are being optimized to improve the overall frac process and results.

Talisman has an extensive land position in Quebec, with the option to earn over 1,200 net sections through drilling. The Company is currently drilling the first of a four-well pilot program to earn the land while evaluating both shale plays. The first earning well, La Visitation, is expected to be completed in November. All licensing and surface access has been arranged for the remaining earning wells, with the intention to have all wells completed by the end of the first quarter of 2009.

Outer Foothills

In the Outer Foothills, production averaged 17 mmcf/d in the quarter. Recent results in Ojay and Hinton have been encouraging with one well at Hinton capable of 11 mmcf/d and two wells at Ojay, each capable of 5 mmcf/d.

We currently have five operated and two non-operated rigs working in the Outer Foothills region. Talisman has 25 mmcf/d behind pipe, which is expected to come onstream with the completion of new pipeline capacity in the first quarter of 2009.


In Saskatchewan, Talisman continues to drill a successful development program (the "Bakken Core") in this unconventional Bakken oil play with three drilling rigs. Current production is over 1,900 boe/d, from 24 gross (20 net) wells, with a forecast exit rate of 2,400 boe/d. Bakken oil production could continue to grow at this rate through 2009.

Talisman plans to drill an additional 18 gross wells (15.5 net) before the end of the year in this area as the focus shifts to development of the core. Outside of the core, Talisman has drilled eight 100% working interest wells and is currently evaluating these results.


In Monkman, a new production record was set, reaching 153 mmcf/d in August, with production in the quarter averaging 140 mmcf/d, or 18% above the third quarter of 2007. In the Alberta Foothills, production averaged 189 mmcf/d in the quarter, a decrease of only 3% over the same period in 2007.


The UK North Sea continued to generate substantial amounts of free cash flow during the quarter, with netbacks averaging over $80/boe.

Production from continuing operations in the UK averaged 106,723 boe/d during the quarter, up 20% from the same period in 2007 and 15% above the second quarter 2008. Production during the third quarter improved versus the same period in 2007 with increased throughput at Tweedsmuir, a full quarter of production from the Blane field (which came onstream September 2007) and improved uptime at Tartan. This was partially offset by planned maintenance shutdowns on the Bleo Holm (Blake and Ross fields) and the Clyde platform, as well as compressor availability at Claymore and Clyde.

Tweedsmuir production averaged 28,641 boe/d (net) during the quarter, an increase of 28% over the second quarter following the completion of the high pressure facility modifications.

Two development wells were drilled during the quarter at Claymore and one at Ross. The Claymore wells were part of Talisman's 2008 three-well through tubing rotary drilling program. Development of the Galley field tie-back is progressing, with first production expected in the fourth quarter of 2008.

During the quarter Talisman announced the sale of its non-operated interests in the Dutch sector of the North Sea.

The MacDonald exploration well was plugged and abandoned subsequent to quarter-end. Within the next six months, exploration wells will be drilled at the Godwin and Shaw prospects in the vicinity of the recent Cayley discovery.


Production from continuing operations in Scandinavia averaged 34,405 boe/d during the quarter, up 21% over the same period in 2007 and 4% above the second quarter 2008. The production increase was due to new production from wells at Brage, Gyda, Varg and the Blane field, which commenced production in September 2007. The increase was partially offset by natural declines at Veslefrikk.

During the quarter, Talisman drilled two development wells at Gyda and two at Varg. The Marsvin exploration well has been plugged and abandoned.

At the Rev development, the temporary floating accommodation unit has returned to the Armada platform and the work to complete the Rev topsides at Armada has restarted. First production is expected in early 2009.

The Yme development is proceeding towards first production in the second half of 2009. During the quarter the offshore submerged storage tank was installed at Yme and the subsea pipeline installation work was started. Development drilling is expected to start in the fourth quarter.

Southeast Asia

In Southeast Asia, production averaged 93,482 boe/d, comparable to the same period last year and 3% above the previous quarter. Indonesian production averaged 56,845 boe/d, 13% higher than the same period last year and relatively unchanged from the previous quarter. Production in Malaysia/Vietnam averaged 33,498 boe/d, 10% lower than the same period last year, due to natural declines and a planned shutdown, but 11% higher than the previous quarter, due to first gas production (net gas sales of 26 mmcf/d) from the Northern Fields Development, which came onstream at the end of July.

Northern Fields drilling operations and progress on the main Bunga Orkid-A processing and accommodation platform are on schedule for first oil from the Northern Fields Development at the end of first quarter 2009. Three of five initial gas wells were completed in mid-October and each are currently producing approximately 70 mmcf/d gross raw gas (20 mmcf/d net sales gas), in line with pre-drill expectations. The remaining two wells will be tested and completed in mid-December. Development drilling continues, with about one-quarter of the planned 50 well program completed to date.

In Indonesia, Talisman's natural gas sales averaged 270 mmcf/d, up 16% from a year ago and relatively unchanged from the previous period. These volumes are expected to increase as additional markets are opened up in West Java. In the Sageri PSC, pre-survey scouting was completed for the 5,000 kilometres of 2D seismic, which is scheduled to commence in the fourth quarter.

In Vietnam Block 15-02/1, the Reserves Assessment Report for the Hai Su Den discovery was approved in August. An Outline Development Plan for Hai Su Trang and an Early Production System for Hai Su Den are now being prepared and will be submitted in November for approval by the Government of Vietnam. The Hai Su Den-2X appraisal well in Block 15-02/1 is currently at TD and preparing to test and a 3D seismic program was completed on the central portion of the Block during the quarter.

Phase 2 drilling operations of the Song Doc development in Vietnam commenced in the third quarter with the completion and tie-back of the five pre-drilled wells. The Song Doc FPSO arrived in Southeast Vietnam at the end of the third quarter and first oil is now expected in late November.

Production in Australia was 3,139 bbls/d, almost half that of the same period last year and 8% lower than the previous period, due to the continuing riser and flowline repairs. The Corallina riser was successfully replaced in the third quarter; however, the production flowline also needed replacing and will be procured and installed in the second quarter 2009. Consequently, Corallina will continue to be produced at restricted rates via the gas lift flow line.

Talisman received approval of an extension of Petroleum Retention Licence PRL-01 in the Gulf of Papua, Papua New Guinea, which contains the Pandora gas discovery. 3D seismic acquisition of the area is expected to commence in early November.

Other Areas

In Talisman's other areas, total production during the quarter averaged 20,848 boe/d. Production from continuing operations, which comprises Algeria and Tunisia, averaged 15,843 boe/d, an increase of 43% over the same period in 2007 and slightly higher than the previous quarter of 2008.

In Algeria, production increased due mainly to the successful commissioning and continued operation of the MLN Expansion gas compressor and an extended facility shutdown at MLN in 2007. Production in Tunisia decreased in the period due to natural declines.

In Trinidad and Tobago, production averaged 5,005 bbls/d, down 29% from the same period a year earlier due mainly to natural decline. The Angostura gas project was sanctioned in the quarter. Talisman has initiated the sale of its Trinidad and Tobago assets.

In Colombia, Talisman was a successful joint bidder in two large Technical Evaluation Agreement areas in the Llanos Basin and evaluation work is underway for Colombia's next two bid rounds. This increases the Company's exploration blocks to nine in the Llanos Basin, where drilling is expected to start late in the first quarter of 2009. The Huron-1 well on the Niscota Block spud in mid-June and was drilling ahead at the end of the quarter.

In Peru, preparations continue towards drilling an appraisal well at the Situche Centrale discovery, expected to spud early in 2009.

In the Kurdistan region of Northern Iraq, Talisman is acquiring 200 km of 2D seismic data across Block K39. Seismic data will be combined with reservoir and engineering data to define prospects for drilling in 2010-2011. On Block K44, the Sarqala-1 well continued drilling during the third quarter.